Diesel Prices Hit Record High

Diesel prices have soared to a record in many cities while petrol is at three-year high as international crude prices hover around $70 a barrel.

The rise in global prices in recent months has raised concerns about inflation and a higher import bill.

The government had raised taxes on fuel when prices had plunged in 2014.

On Monday, diesel was sold for ₹61.74 per litre in Delhi, ₹64.40 in Kolkata, ₹65.74 in Mumbai and ₹65.08 in Chennai.

State oil companies and private firms price petrol and diesel within a few paise of each other. Petrol prices in Delhi and Chennai are highest since August 2014 while they are highest since July 2015 in Kolkata, and since October 2017 in Mumbai.

Petrol cost ₹71.18 per litre in Delhi, ₹73.91in Kolkata, ₹79.06 in Mumbai, and ₹73.80 in Chennai on Monday.

Petrol and diesel prices have been market-determined for the past few years in India where state companies control more than 90% of the fuel retail market.

Companies determine retail prices by adding their marketing margin, dealers’ commission and government duties to refinery gate prices that are linked to international prices of petrol and diesel.

Prices of petrol and diesel in the international market largely follow crude prices although specific fuels’ own demand-supply equation, constraints in refining or transportation capacity and other business or geopolitical events sometimes create divergences. Since July 1, crude oil is up 46%, while diesel has risen 42%, and petrol 22% in the international market, according to Bloomberg data.

In Delhi, diesel and petrol prices are up 16% and 13%, respectively, since July 1. Prices of petrol and diesel vary from state to state according to local levies.

An extended agreement by Organisation of Petroleum Exporting Countries and Russia to curtail output to clear the supply glut has lifted prices substantially in the past six months. The producers’ determination to continue with the cut despite recent price surge, along with healthy demand for oil amid strong global economic growth, has strengthened the oil rally.

Higher oil prices are not good for heavy consumers like India, which imports nearly 82% of its requirement. Higher fuel prices trigger broader inflation, shrink room for rate cuts by central bank, increase demand for foreign exchange, and leave the exchequer with lesser resources for development work as demand for subsidy and tax cuts rises.

No comments: